A Time to Talk About Debt and Taxes

As a senior citizen enjoying the benefits of Medicare and Social Security, as well as the advantages of the Bush tax cuts, I could be quite content to leave all entitlement programs as they are. But as a proud American, and one who understands the ramifications of not only the country’s defaulting on its obligations but also our exploding debt, I am more than willing to pay my share of the cost of Medicare and take a reduction in my Social Security benefits.

Huge spending cuts to programs that take care of children and people less fortunate than I, however, should be off the table. Not only are they unfair and reek of class distinctions, but they are also job killers, and job creation is indeed what America desperately needs to climb out of the doldrums.

Mr. Krugman is 100 percent correct in his analysis of what immediate deficit reduction and huge spending cuts would do to the economy. President Obama should stand tough with respect to our desperate need to increase revenue before he gives away the store to the Republicans.

HENRY A. LOWENSTEINNew York, July 8, 2011

To the Editor:

Paul Krugman is correct.

We need to focus more on keeping existing jobs and on job growth — both of which are linked to government spending — and less on debts, balancing government budgets and budget cuts.

Nicholas D. Kristof’s July 7 column, “Taxes and Billionaires,” contends that carried interest is a “loophole” that needs closing.

Photo

Credit
André da Loba

For more than 50 years, our tax system has rewarded those who invest expertise to grow a business and those who invest capital. As a result, the tax code treats carried interest and enterprise value as capital gains.

Taxing these gains as ordinary income would upend decades of settled tax law. Even worse, it would enshrine into law a policy that puts a higher value on the financial contributions of those with wealth than the contributions of vision and hard work from those who lack wealth and resources.

Carried interest is a profits interest obtained upon the sale of an operating business and carries far more risk than a regular salary, namely the risk that the profits will have to be returned to the investor if the company doesn’t generate a significant profit. Does anyone who gets a salary have to return his or her wages if things don’t go well?

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By dramatically increasing the cost of capital, the carried interest proposal will discourage the risk-taking required to start, grow and save American companies. It will put the United States at a competitive disadvantage and draw capital — and jobs — from our shores to more friendly foreign markets.

Adding this proposal to a deficit reduction package intended to restore confidence in the American economy would do the opposite.

The very first line of your editorial says it all, loud and clear: “How far will Republican lawmakers go to protect millionaires?” As a result of Republican extremism, the United States has become a divided nation, divided into haves and have-nots. The wealthy refuse to give up anything, and the have-nots want everything.

Two immovable, unyielding forces. It is no longer a matter of who will win, but of how much will be lost because of the lack of sacrifice by all.

JACK E. COHENHewlett, N.Y., July 6, 2011

A version of this letter appears in print on July 9, 2011, on Page A18 of the New York edition with the headline: A Time to Talk About Debt and Taxes. Today's Paper|Subscribe